Intel says it is expecting PC sales to be flat for this year,
hoping that sales of processors for servers, tablets and smartphones will compensate for the drop-off in PC sales.

Intel CEO Brian Krzanich said the company has been slow to respond to the shift in consumer spending from PCs to tablets and smartphones, but intends to make up for lost time. The company will now place as much importance on Atom processors for ultra-light laptops, tablets and phones as it does on the much higher-priced Core processors that go into PCs.

Krzanich vowed to speed up the process of shifting production of Atom processors to Intel's latest fabrication lines. Atom won't be the first chip to move onto Intel's most advanced 14 nanometer process, which starts to be used later this year. CFO Stacy Smith implied that the first 14 nanometer part will Broadwell, the codename for a shrink of its Haswell design that appears likely to arrive early next year.

Intel is also bringing out a major new update of its Atom processors, code named "Bay Trail," later this year. These chips will appear in touch-screen hybrid and tablet PCs at price points Intel hasn't been able to reach before, according to Krzanich.

Bay Trail will be offered in tablets priced at "$199 and below," Krzanich said. "Some you'll see even lower -- $150, and below that, as we go through the holiday season," he said.

The other important Atom chip for mobile is Merryfield, designed to give Intel a bigger foothold in the smartphone market. Merryfield will ship by the end of the year.

Intel's revenue for the April to June period was $12.8 billion. That was down 5 percent from a year ago and just below the company's projections.

Net income for the quarter was $2 billion, or 39 cents per share. That was down 29 percent from a year ago.

For the third quarter, Intel expects revenue of $13.5 billion, plus or minus $500 million. Analysts were expecting $13.7 billion.